Maine State Revenues, Budget, Taking Serious Hits From High Oil Prices

AUGUSTA — Oil prices, which hit an all-time high of $88 a barrel on Tuesday, could dampen holiday sales and further erode the state's revenue projections that already suffer from lower-than-anticipated corporate income and cigarette tax collections. "Overall, consumer sales are flat," Mike Allen of the Maine Revenue Service told the state's Consensus Economic Forecasting Commission Tuesday. Add high oil prices into the mix, and, "I'm bracing for a holiday shopping season that may not be as strong as we had hoped," Allen said.

The price of oil, even if it comes down from this week's all-time high as expected, is still driving up the cost of home heating fuel and that means people have less to spend in stores. The average price of home heating oil was $2.70 per gallon on Monday, or 50 cents higher than last year at this time.


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The big drivers are the $10 million shortage in the corporate income tax line; around $3 million in sales tax and $3 million on cigarette taxes. The cigarette tax shortage has confounded revenue analysts all year because it cannot be explained by people simply quitting, which had averaged about 1 percent a year. The shortfall would be even greater except tobacco products other than cigarettes, like the cheaper roll-your-own tobacco packages, are running ahead of budget.

Sales taxes were buoyed this summer by a good tourism season, particularly in June and August. Allen said restaurant and lodging sales were up 7 percent in August over the previous year.

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http://www.timesrecord.com/website/main.nsf/news.nsf/0/59C02153DC19658B052573770062D02F?Opendocument